(Steps towards financial planning)
While these are just guidelines, it serves as an example for budget management in each expense category.
The 50/30/20 budget rule is a simple budgeting plan that separates needs, wants, and savings into a three percentage pool. 50% of after-tax income goes for necessities, 30% of the income that goes towards non-essential items & 20% into savings.
The 80/20 rule in savings is nothing but a consolidated version of the 50 30 20 rule. Based on the rule, 20% of the after-tax income should go to savings and 80% into needs and wants. The main focus of this rule is the 20% saving.
Also known as the 70 20 10 money rule, the budgeting concept indicates one should spend 70% of after-tax income on expenses, 20% goes to saving, and 10% loan repayment and charity.